US: Midwest states speaking about multi-state programme

Fourteen Midwest states are actively discussing the feasibility of a multi-state programme and other ways to comply with the Environmental Protection Agency’s (EPA) proposed rules for existing power plants, said two sources with knowledge of the discussions.

The EPA released its proposed draft rules for existing power plants in June (see EDCM 2 June 2014). Those rules would require overall power emissions to be reduced by 30% from 2005 levels by 2030. States would have individual goals under the EPA’s proposal, which should be finalised this summer.

Arkansas, Illinois, Indiana, Iowa, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, South Dakota and Wisconsin are participating in the Midcontinent State Environmental and Energy Regulators (MSEER) group, which has held five discussions so far. Kentucky and North Dakota are reportedly informally involved in the group.

All the states involved have some indirect or direct connection to the Midcontinent Independent Systems Operator (MISO), which manages the grid in the region. The Bipartisan Policy Center and Great Plains Institute are consulting and modeling the options for the MSEER group.

“We are in the very early stages,” a source said of the meetings. “The next thing is to look at a mechanics of a programme. So far, we have just been looking at the requirements.”

The source said the states have not looked at linking with existing carbon programmes, such as the Regional Greenhouse Gas Initiative (RGGI) or California’s cap-and-trade programme. The source added neither programme has spoken with the group formally about their carbon scheme.

Some market participants had expected a RGGI-like programme to develop in the Midwest, because it could be easily be put in place to comply with the EPA’s requirements.

A second source emphasized the discussions are informal and no formal partnership or linkages between the states had been discussed, The source said the MSEER group is operating as a working group trying to find the best path to compliance, but those states still retain the independence to create their own compliance plans.

A source from Wisconsin said the state is currently evaluating it options and declined to discuss its talks with neighboring states. Robert Kenney, the leader of the 14-state group and chairman of the Missouri Public Service Commission, did not respond to questions from ICIS about the plan.

Both sources said it is entirely possible that some of the states could create a multi-state emissions trading system (ETS), but it will largely depend on the final rule from the EPA.

The states could also opt to link specific programmes, such as an ETS, but then run independent energy efficiency or renewable portfolio standard programmes. Both sources said that option could be viable under the EPA’s requirements.

States, including the 14 involved in discussions, are not expected to make any final decision until closer to the EPA’s deadline. States will have to submit a state implementation plan by June 2016, but they could get an extension until 2017 if they join a multi-state programme.

By in large, experts believe that states will pick the cheapest path to compliance. Dan X. McGraw